Australian telecommunications company TPG Telecom Ltd (ASX: TPG) has reported its full-year results today.
At the time of writing, the TPG share price is edging lower, down nearly 1% to $6.95.
How did TPG perform during the year?
Comparing results is difficult due to the merger between Vodafone and TPG Telecom. Full-year results include a full 12 months’ contribution from Vodafone Australia (mobile business) and a contribution of six months and four days from TPG Telecom (internet business).
Pro-forma results calculate figures as if the merger was complete throughout 2019 and 2020 – a more accurate picture of performance.
Revenue for the full year increased by 24% to $4.35 billion, while pro-forma revenue decreased by 6% to $5.52 billion.
EBITDA for the full year grew by 18% to $1.39 billion. On a pro-forma basis, EBITDA fell by 10% to $1.79 billion. Management noted the impact of COVID-19 during 2020, which reduced EBITDA by approximately $90 million, in addition to NBN and regulatory headwinds.
Full-year net profit after tax (NPAT) came in at $734 million. On a pro-forma basis, NPAT dropped by 10% to $282 million.
Positively for shareholders, the TPG Board has declared a maiden dividend of 7.5 cents per share.
Operational highlights
TPG’s internet business performed strongly during the period due to increased streaming and work from home arrangements. The business’ NBN base increased by 28% to 1.90 million, with 415,000 net subscriber growth. Fixed broadband grew its subscriber base 6% to 2.17 million.
The mobile segment was impacted by the absence of overseas visitors and international students. Postpaid mobile customers declined by 5% to 3.26 million. The average revenue per user fell 5.1% due to a decline in roaming charges and increased market competition. Moreover, the prepaid segment was impacted by the merger delay with Vodafone. As a result, prepaid mobile customers fell by 22% to 1.97 million.
The corporate segment pro-forma revenue declined by 7%, driven by price erosion and loss of low-margin NBN wholesale business. However, sales momentum remained strong and TPG Telecom became the highest seller of NBN Enterprise Ethernet.
Outlook
The business will begin offering 5G fixed wireless services to customers in the first half of 2021, with the goal of 85% 5G population coverage in the top six Australian cities by the end of the year.
Furthermore, TPG is targeting $70 million of cost synergies in 2021, which excludes the contribution from fixed wireless services and revenue synergies from cross-selling.
Reduced international roaming and international visitors will continue to impact financial performance throughout 2021, along with NBN headwinds of approximately $60 million and an $11 million negative impact from the Regional Broadband Scheme levy.
My take
TPG operates in a highly competitive industry with incumbents Telstra Corporation Ltd (ASX: TLS) and Optus, in addition to recently-listed disruptor Aussie Broadband Ltd (ASX: ABB).
With NBN and COVID-19 induced headwinds, I think the next year will remain difficult. Therefore, I’ll be sitting on the sidelines watching if management can continue to take market share.
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